A blog focused on Dynamics CRM aimed at project sponsors, users and non-technical administrators. Read three of my articles and if something is of interest, read more, otherwise check out some of the other excellent CRM blogs at https://community.dynamics.com/product/crm/b/default.aspx

Microsoft’s numbers will be buoyed by their international online rollout

Given Microsoft released some figures at the Worldwide Partner Conference and salesforce recently released figures as part of their second quarter results, I thought it was a good time to revisit. Unfortunately, with Microsoft only intermittently releasing numbers and salesforce confirming, in the quarterly results call, this would be the last quarter where they release customer numbers, it will be difficult to do this kind of review in the future. However, as salesforce is diversifying outside of their stock ticker namesake (CRM), a direct comparison of numbers is becoming less relevant, unless we start bringing in the Microsoft ERP, CMS and BI solutions as well.

Numbers in red are my best guess, based on the known numbers. Essentially I have estimated the customer size and then used this to generate the subscriber size. I thought it was important to include my large tables of numbers, rather than just show the pretty graphs so others can see how I generated them and also slice and dice them as they see fit.

As can be seen, Dynamics CRM’s average customer is now almost double the size of the salesforce average customer. Graphing the company sizes, we see my previous thoughts that the sizes were tapering was unfounded, both are increasing and it appears Microsoft’s are growing a little faster as the ratio has now gone from 1.5 to 2.0.

Market Maturity

Here is the apples to apples combined data.

Month

SFDC Subscribers

SFDC Customers

MSFT Subscribers

MSFT Customers

Subscriber Ratio

Customer Ratio

Difference in Subscribers

Total Subscribers

Customer Size Ratio

Mar-06

267,000

15,500

150000

6000

1.78

2.58

117,000

417,000

1.5

Jul-06

315000

17500

200000

7000

1.58

2.50

115,000

515,000

1.6

Oct-06

366700

19300

250000

8000

1.47

2.41

116,700

616,700

1.6

May-07

482000

24100

400000

10000

1.21

2.41

82,000

882,000

2.0

Mar-08

742,900

32,300

500000

11000

1.49

2.94

242,900

1,242,900

2.0

Jul-09

1324809

49067

1000000

20833

1.32

2.36

324,809

2,324,809

1.8

Apr-10

1696800

60600

1100000

22000

1.54

2.75

596,800

2,796,800

1.8

Jul-10

1878243

64767

1400000

23000

1.34

2.82

478,243

3,278,243

2.1

Apr-11

2449000

79000

1700000

27000

1.44

2.93

749,000

4,149,000

2.0

Jul-11

3819600

106100

2000000

30000

1.91

3.54

1,819,600

5,819,600

1.9

***STOP PRESS*** 2011-11-18 Leon says: There is an error in this table and the catch up graphs below. I’ve fixed this up here.

In this case I have extrapolated the salesforce data to match the month the Dynamics CRM numbers were announced. So if the Dynamics CRM number was announced one month after a salesforce quarter announcement, I guess the SFDC customer number and then use the guessed average customer size to generate a subscriber number.

Total subscribers across both products know no bounds and both products continue to bring on subscribers.

It is fair to say this market is still far from maturing with no signs of populations tapering.

In terms of my previous predictions, the trending of Excel came through with the goods. Salesforce made three million subscribers somewhere between September 2010 and December 2010 (I predicted October 2010). Dynamics CRM made 1.5 million subscribers somewhere between July 2010 and April 2011 ). I predicted December 2010.

For my next set of predictions, I believe salesforce will make four million subscribers before the end of the year but after the Q3 results. Dynamics CRM will make 2.5 million subscribers before the end of the year and probably before November.

Is Dynamics CRM Catching Up?

***STOP PRESS*** 2011-11-18 Leon says: There is an error in the market maturity table and the catch up graphs below. I’ve fixed this up here.

So the big question is if Dynamics CRM is catching up on salesforce. The answer, unfortunately for those of us on the Microsoft side of the fence, is no. The boost in numbers from the international rollout has either not happened or has been insufficient. Here is the evidence.

***Begin erroneous speculation due to my inability to combine numbers into one table correctly***

The subscriber ratio (SFDC subscribers/MSFT subscribers) was dropping or, at least, was stable at just under 1.5 until the last quarter where salesforce has jumped away. The subscriber difference tells the same story. While there was a possible turning point in mid-2010, this appears to be an aberration with salesforce running away.

So what has happened? Has salesforce become really good and left Dynamics CRM in the dust? Is something else at play?

It is true that salesforce has been making a lot of acquisitions but, functionally, the differences in the Sales Cloud and Service Cloud products are more on the edges than at the core and equal on both sides. Salesforce has Chatter, Dynamics CRM is soon to have a Chatter equivalent but has SharePoint and Lync instead. Dynamics CRM has better Outlook integration but its browser client is limited to Internet Explorer (until early next year) and so on. This idea of equivalency is also confirmed by the Gartner and Forrester reports which rate both products very highly.

My speculation is the reason the salesforce numbers have leaped is because of the mix of products that make up the totals. The salesforce numbers cover all their products, not just the Sales Cloud and Service Cloud products. They include Chatter, Jigsaw, Heroku, Radian6 and so on. I imagine it only includes paying Chatter clients but it is not clear. Unfortunately, with salesforce announcing they will not be regularly releasing customer figures any more, it is difficult to know.

***END ERRONEOUS SPECULATION***

As for popularity, Google Trends suggest Dynamics CRM is still catching up with salesforce in terms of search results.

This is a graph of the search popularity of “dynamics crm” and “salesforce.com”. As can be seen, the gap is narrowing.

Here I have taken the salesforce subscription numbers above and the financial numbers from the detailed summary I used in last week’s blog. ‘PUPM’ stands for ‘per user per month’. So, in the case of ‘Revenue PUPM’, this is the revenue received by the average subscriber each month. In this case the number has tapered to around $50 and has been stable for the last 12 months. Revenue Cost is a figure salesforce use claiming it is the expenses directly related to the revenue, ignoring those inconvenient operating costs of sales and marketing and research and development. The revenue cost per subscriber per month is at around $10 and has been there for almost three years. Those pesky, expensive operating costs (sales and marketing, research and development and general and administrative costs) have hovered at around $40 per subscriber per month for about two years.

Doing the maths, the profit of a subscriber is $50 (revenue) – $10 (revenue cost) – $40 (operating cost) = $0 (profit). The variable for profitability appears to be the operating costs per subscriber. While it is hovering around $40 per subscriber per month, if this could be reduced, this would bring salesforce into profitability.

Conclusions

Both products are growing without obvious bounds and the market still appears to be growing for the two products. In terms of customer size, Microsoft CRM is penetrating the enterprise more effectively than salesforce products with the average Dynamics CRM customer size now being double the size of a salesforce customer.

In terms of catching up, it seems as if the range of salesforce products is getting away from Dynamics CRM, but that is ok. Without a clearer understanding of how the salesforce customer and subscription numbers are broken down, the comparison has only limited value. As for ‘front of mind’, Google Trends suggests Dynamics CRM is catching up on salesforce.

Finally, the financials for salesforce mean that they are not making money from their subscribers and the financials seem to be settling at around breakeven. Without reducing their operating costs, it is not clear how this situation will change.

The word 'salesforce' is too generic as it has context outside of a specific software product. It would be like using 'CRM' and pretending all hits refer to Microsoft.

If you do a google search on 'salesforce -"salesforce.com"', you will see what I mean.

You may also want to check out this one, http://www.google.com/trends?q=%22dynamics+crm%22%2C+%22salesforce.com%22%2C+%22microsoft+crm%22&ctab=0&geo=all&date=all&sort=0 . Combined, "Dynamics CRM" and "Microsoft CRM" have consistently outranked "salesforce.com"

There is an error in the market maturity numbers. The salesforce numbers are in error, except for the last value, which was correct. It was therefore my mistake which caused the graph jump and nothing salesforce did. I'll fix this up in my next blog (November 2011)

About Me

I'm a Dynamics CRM Consultant based in Sydney, Australia. I've been working with CRM systems for over ten years and with Dynamics CRM since version 1.0 beta.
In October 2009 I was honored with the MVP award for CRM from Microsoft.
If you think you could use me, feel free to call me on +61 4 1134 8229 or email me on leon dot tribe at gmail.